The tariff is the protection the wolf gave the lamb. —Rep. James Beck, 1882
Protectionism produces political corruption, economic stagnation, and international conflict. Yet, many people will insist that even though protectionism hinders a nation’s ability to feed, clothe, and house itself, the moral gains from protectionism are greater than the economic losses. But what is the moral core of protectionism? What is the ethical basis for fair trade as it is practiced?
Every restriction on imports is an attempt by the U.S. government to compel some Americans to pay higher prices to other Americans than they otherwise would have paid. No consumer offers to voluntarily pay these higher prices: they pay higher prices only because 17,000 U.S. Customs Service officials leave them no choice. Henry George observed over a hundred years ago:
Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same — to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading.
Yale University professor William Graham Sumner noted in the last century: “No coercion is necessary to make men buy dollars at 98 cents apiece. The case for coercion is when it is desired to make them buy dollars at 101 cents apiece.” Even when a person does not buy an imported product, the price of the competing domestic product is higher because of the restriction on foreign competition.
Trade barriers raise prices, and price hikes have the same effect as a federal decree that some Americans shall no longer be allowed to buy the restricted product. As John Stuart Mill noted in his essay “On Liberty,” “Every increase of price is a prohibition to those whose means do not come up to the augmented price. . . .” Government cannot drive up prices without knocking some people out of the market — without taking a notch out of someone’s living standards, changing the types of clothes some people wear, the cars some people drive, the food some people eat, the medical care some people receive. The 1986 Softwood Lumber Agreement added $1,000 to the cost of constructing a new house in the U.S., thereby knocking as many as 300,000 people out of the home-buying market — effectively decreeing that many families would be forced to live in trailer homes (so-called tornado magnets) instead of a real house. If the federal government intervened to cause old people’s bones to automatically break when the elderly fall, that would be denounced as the height of idiotic tyranny. But, as long as federal policy consists instead of a quota that imposes the equivalent of a 170 percent tariff on dairy imports, thereby insuring that many Americans will have calcium deficiencies and weak bones, that is okay. What is the moral difference between putting a 50 percent surcharge on imported clothing and commanding millions of poor people to wear tattered garments?
All trade barriers rest upon the moral premise that it is fairer for the U.S. government to effectively force an American citizen to buy from an American company than to allow him to voluntarily make a purchase from a foreign company. U.S. trade policy assumes that the moral difference between an American company and a foreign company is greater than the difference between coercion and voluntary agreement. The choice of fair trade versus free trade is ultimately this: Is coercion is ever fairer than voluntary agreement?
Every trade restraint is a moral issue, forcibly sacrificing some Americans for the benefit of other Americans. Treasury Secretary Robert Walker observed in 1845:
If the marshall were sent by the federal government to collect a direct tax from the whole people, to be paid over to the manufacturing capitalists to enable them to sustain their business, or realize a larger profit, it would be the same in effect as the protective duty.
If a businessman pulls a gun on a customer and demands 20 percent more for a product, that is robbery. If a politician intervenes to the same effect, it is fair trade.
Protectionism rests upon a moral glorification of an economy’s least competitive producers. Senator Ernest Hollings announced in 1988: “The market will take care of consumers. The Government must take care of producers. No government was ever organized to get everybody something for a cheap price. The market does that.” (Hollings made this observation in a speech calling for further government suppression of the market.) Protectionists murder the market and then scorn consumers for being orphans.
Fair trade is based on the doctrine that producers have rights and consumers have duties. Fair trade assumes that the consumer’s freedom of choice is an injustice to the producer. The soul of protectionism is that if a company cannot stand on its own two feet, government should force its customers to carry it. Protectionism is an economic no-fault insurance policy: no matter how often an American company crashes in the marketplace, the consumer must pay the bill.
Protectionism is a Dred Scot policy for consumers — the federal government promising not to let American consumers escape from American businesses who want to charge them higher prices. Protectionism means shackling some people in order to enrich other people. As Ambrose Bierce observed, a tariff is a “tax on imports designed to protect the domestic producer against the greed of his consumer.”
Government cannot restrict trade without redistributing income. Tariffs, as a government tax for private benefit, are either fair or unfair. Either the government has a moral justification for imposing a 7.4 percent surcharge on wooden clothespins imports for the benefit of U.S. clothespin makers — or it does not. U.S. trade policy implicitly assumes that fair trade can be achieved by giving certain officials unlimited power to ordain how many of each foreign good other Americans may buy, and exactly what surcharge they must pay. But the mathematical precision of American tariffs and quotas makes a mockery of any reasonable concept of fairness. If we assume that current trade laws are fair, then if the tariff on orange juice, currently 40 percent, was instead 41 percent, it would be unfair to American consumers; and if it was 39 percent, it would be unfair to American orange growers. Would allowing Americans to consume more than two foreign peanuts per person per year be unfair to American peanut growers?
Under U.S. law, voluntary agreements between Americans and foreigners are the test of fairness for some products, while for other products, political dictates determine fairness. If a person wants to buy an Italian sweater, he may spend his dollars as he chooses; but if he prefers to buy an identical sweater made in Korea, the U.S. government intervenes by establishing quotas on how many such sweaters Americans can buy. The difference between goat cheese and cow cheese requires antithetical rules of fairness — letting goat cheese imports be determined by unconstrained wheeling and dealing, while cow cheese imports are determined by presidential proclamations establishing import quotas.
Fair trade in practice means a moral and political deification of high prices. American trade law assumes that there are dozens of things that can make an imported product’s price unfairly low, but almost nothing that can make an import’s price unfairly high. U.S. dumping law assumes that American producers are treated unfairly unless a foreign company charges the highest prices in the world to its American customers. Investigations by both the International Trade Commission and the federal Committee for the Implementation of Textile Agreements presume that it is a bad thing if foreign products are priced lower than American products.
Sen. Jesse Helms in 1990 denounced U.S. textile policy “that gives our market to foreigners.” Helms apparently believes that the U.S. Congress should have the right and power to give the market to whom it chooses. To talk of giving the market is, in reality, to talk of giving away the dollars of anyone who must depend on that market. To talk of imports’ fair share of the U.S. market means to talk of U.S. producers’ fair share of American workers’ paychecks. For politicians to allocate market share is to treat consumers like serfs who can be freely traded by their lords.
Protectionism means an automatic partial expropriation of the buyers’ dollars. The fundamental question of protectionism is: Who should pay the price of a company’s lack of competitiveness? Does every needy company have a right to put a partial lien on its customers’ bank accounts? In a nation that has thousands of business bankruptcies each year, who should decide which firms or industries should be politically exempted from the rigors of competition?
American trade policy presumes that an exchange between an American and a foreign citizen is fundamentally morally different than trade between two Americans. The question of the fairness of a company’s prices now rests on where imaginary lines on a map happen to be drawn — on some deal cut by long-dead politicians or on how much territory some army conquered a few centuries before. Because Nova Scotia never joined the other British colonies in the 1776-1783 revolution, the Commerce Department judged a Canadian company guilty of dumping groundfish in its sales in Boston. Because Britain and the United States agreed in 1849 that the 49th parallel would be the boundary between the western United States and Canada, the Commerce Department condemned as unfairly priced raspberries from Saskatchewan sold in Seattle. If one company charges different prices in Vancouver, Washington, and Miami, Florida, that is fine. But if another company charges exactly the same different prices in Vancouver, Canada, and Miami, Florida, the U.S. Commerce Department rushes out to collect a few hundred thousand pages of documents to find out what went wrong.
Trade barriers come down to a question of political legitimacy. What gives one person a right to arbitrarily and forcibly reduce another person’s living standard? Should election into office automatically give a person the right to dictate the food other people eat, the clothes they wear, and the cars they drive? Does winning a seat in Congress mean that a person — or group of people — can rightfully dictate that each American will be allowed only one teaspoon of foreign ice cream a year and that only one American out of 10,000 will be allowed to buy a Czech wool sweater each year? Protectionism is nothing but politically controlled trade — which means political control of the life of the average citizen.